Everything You Need To Know About Rural 1st Construction Loans

If you’re looking to build your dream home in a rural area, financing the project can be tricky. Typical mortgage lenders don’t always understand the unique needs and challenges of rural construction. That’s where Rural 1st can help. As experts in rural lending, Rural 1st offers tailored construction loan programs to help you build the home you’ve always envisioned.

In this comprehensive guide, we’ll explain everything you need to know about Rural 1st construction loans. Whether you’re building from the ground up, renovating an existing structure, or constructing a barndominium, Rural 1st has lending solutions to fit your needs. Read on to learn more about interest rates, fees, loan terms, draw requirements, and more. With the right financing partner, you can make your rural homebuilding project a reality.

Overview of Rural 1st Construction Loans

Rural 1st is a nationwide lender that specializes in financing homes and land in rural areas. They offer construction-to-permanent loans designed specifically for building a home in the country.

Here are some key features of Rural 1st construction loans:

• Fixed or adjustable rate mortgages
• Loan terms up to 30 years
• Allows up to 12 months for completion
• Financing for conventional builds, barndominiums, renovations, and more
• One-time closing for construction and permanent financing
• Ability to lock in your permanent interest rate upfront
• Online portal for draw requests and project management

Rural 1st understands the unique needs of rural construction projects. Their team lives and works in rural communities themselves.

Benefits of Using Rural 1st for Construction

There are some major advantages to using Rural 1st versus other lenders for your rural construction loan

Specialization in rural properties – Rural 1st is a rural-focused lender, so their underwriting accounts for the large acreage, unconventional builds, and remote locations common with country properties.

Construction expertise – Their team is experienced in managing the draws, inspections, and other aspects that come with building a home.

Fixed rate options – You can lock in your permanent mortgage rate upfront before construction even begins Other lenders may require a variable rate during the build,

One closing – The construction loan and permanent mortgage wrap into one closing for a streamlined process

Personal support – Local loan officers provide guidance during the build and are available to answer your questions.

Flexibility – Rural 1st offers flexibility not found with all builders. You can use your preferred contractor and have up to 12 months to finish construction.

Low down payment options – The equity in your land can offset some of the down payment requirements.

Using a lender that specializes in rural construction financing can make the process much smoother.

Loan Terms, Rates, and Fees

Rural 1st offers both fixed and adjustable rate mortgages for construction loans. Common loan terms are 10, 15, 20, and 30 year options. They provide a variety of term lengths to balance your budget needs with total interest paid.

Interest rates vary based on your financial profile, chosen term length, and current market rates. Rural 1st loan officers can provide rate quotes specific to your situation. Rates for new construction loans are typically slightly higher than rates for existing homes.

In terms of fees, you’ll pay standard origination fees, appraisal fees, and other closing costs much like you would with any mortgage. Rural 1st has competitive rates and fees compared to other lenders. There are no prepayment penalties if you pay off your loan early.

Be sure to inquire about current promotions as well. For example, Rural 1st frequently offers deals to cover your closing costs.

Loan-to-Value Requirements

The loan-to-value (LTV) ratio compares the amount borrowed against the total appraised value of the property. The LTV helps determine the down payment and equity needed.

For a Rural 1st construction loan, the LTV is based on both the land value and total completed appraisal of the home and property. This allows you to leverage the equity in your land to reduce the down payment.

Here are some typical LTV requirements from Rural 1st:

• 80% LTV for primary residence
• 75% LTV for second home/vacation property
• 70% LTV for investment property

So if you have significant equity in your land, you may need less cash out of pocket. Speak to a loan officer about your specific property value and LTV options.

The Construction Draw Process

Since construction loans are dispersed in phases, Rural 1st uses a draw system to fund each stage of the build. Here is how the draw process typically works:

• The first draw covers initial expenses like permits, survey fees, and mobilizing the contractor.

• Future draws are made as needed to pay for materials and completed work. Draw requests are made online and require inspection reports.

• 10% of the loan amount is held back until project completion to ensure no liens are filed.

• Leftover funds and the holdback are released once the certificate of occupancy is issued.

Rural 1st allows you to submit draw requests yourself online. Their portal provides transparency into where your funds are going.

Completing the Loan and Finalizing Terms

With Rural 1st, you’ll lock in your permanent mortgage rate when construction begins. This provides rate certainty even amidst fluctuating markets. You can also convert your rate lower one time during construction if rates drop.

Once your project is finished, Rural 1st will order a final appraisal. Provided the home appraises for at least the projected amount, the construction loan simply transitions into your permanent mortgage.

There’s no need to apply again or close on a new loan. Rural 1st handles the entire process in one streamlined transaction. The term length, interest rate, and payment remain the same from construction through your permanent financing.

Tips for Success with a Rural 1st Construction Loan

Follow these tips to ensure your construction process goes smoothly from start to finish:

Pick the right contractor – Choose a licensed, experienced rural contractor. Verify they are approved to work with Rural 1st’s loans.

Get all permits – Have all required building permits and approvals before breaking ground. This prevents delays.

Lock your rate – Lock in your long term rate at the start to avoid interest rate hikes during construction.

Manage your draws – Use Rural 1st’s online portal to submit organized draw requests and track payments.

Communicate changes – Keep Rural 1st and your contractor looped in on any changes to the plans to avoid issues.

Inspect thoroughly – Carefully inspect each stage of the build before approving draws to ensure quality.

Following these best practices will set your construction loan experience up for success.

Alternatives to Rural 1st Construction Loans

While Rural 1st construction loans offer many perks, they aren’t the only financing option. Here are a few alternatives to consider:

Local bank construction loans – Community banks that know the rural area often finance construction projects.

USDA loans – The USDA provides low down payment loans for building in approved rural zones.

VA loans – Veterans may qualify for VA construction financing with no down payment.

Owner-builder construction – You act as the general contractor yourself to potentially lower costs.

401(k) or IRA funds – You may be able to use retirement savings without tax penalties.

Home equity loan – If you have sufficient equity in an existing property, a home equity loan is an option.

Adjustable-rate mortgages – An ARM starts with a low teaser rate that later adjusts up.

Compare all your options and talk to a financial advisor to determine the optimal loan product for your build. Rural 1st has solutions to fit most situations.

Is Rural 1st the Right Construction Lender for You?

If you value knowledgeable guidance, flexibility, and loan terms tailored to rural properties, Rural 1st is likely a great fit as your construction lender. Their specialty in rural lending provides distinct advantages. But make sure to evaluate all your options to find the best loan for your financial needs and unique build.

The bottom line is constructing your dream home in the country requires a lender that truly understands the intricacies of rural builds. Rural 1st has the experience and loan products to turn your homebuilding goals into reality. Their customizable construction loan programs provide financing solutions for all types of rural properties and situations. Partner with the experts at Rural 1st to start your building journey and make your country living dreams come true.